You can never know for sure if you’ll need long-term health care. Maybe you’ll never need it. But an accident, illness, or injury can change your needs, sometimes suddenly. So the best time to think about long-term care is before you need it.

Long-term health care involves a variety of services provided at home, in the community and in facilities. These services include:

Home-based care, such as home health aides

Community-based care, such as adult day care

Facility-based care, such as assisted living and nursing home care.

Long-term care can be expensive. Americans spend billions of dollars a year on various services.

How people pay for long-term health care depends on their financial situation and the kinds of services they use. Often, they rely on various payment sources, including:

Personal funds

Government health insurance programs, such as Medicare and Medicaid

Private financing options, such as long-term care insurance.

Personal Funds At first, many people pay for long-term care services with their own money. They may use personal savings, a pension or other retirement fund, income from stocks and bonds, or proceeds from the sale of a home.

Much home-based care is paid for using personal funds (“out of pocket”). Initially, family and friends often provide personal care and other services, such as transportation, for free. But as a person’s needs increase, paid services may be needed.

Many older adults also pay out-of-pocket to participate in adult day service programs, for meals and other community-based services provided by local governments and nonprofit groups, which help them remain in their homes.

Professional care given in assisted-living facilities and continuing-care retirement communities is almost always paid for out of pocket, though in some states Medicaid may pay some costs for people who meet financial and health requirements.

Medicare and MedicaidAnother source of funds for long-term health care is government insurance programs such as Medicare and Medicaid. Medicare is federal health insurance for people age 65 and older, younger people with certain disabilities and all people with late-stage kidney failure. Medicaid is a federal and state health insurance program for people with limited income and resources. These programs have rules limiting who’s eligible and what services are covered.

Medicare coverage is limitedContrary to what many people think, Medicare doesn’t cover most long-term care costs. It does pay for some part-time services for people who are homebound and for short-term skilled nursing care, but it doesn’t cover ongoing personal care at home, such as help with bathing. It may cover part of the first 100 days in a nursing home.

“Medigap” policies, which supplement Medicare, aren’t designed to meet long-term health care needs. But some policies cover co-payments for nursing home care that qualifies for Medicare coverage.

Medicaid coverage is broaderMedicaid pays for health-care services for people with limited income, and it’s an important source of payment for long-term care services. Personal care, home health care, adult day care and nursing home care are examples of the types of Medicaid-covered services used by older adults.

However, Medicaid is not available for everyone. To be eligible, you must meet certain financial and health requirements. People with financial resources above a certain limit will most likely not qualify unless they first use up their own resources to pay for care, which is called “spending down.”

Who is eligible and what services are covered vary from state to state.

Paying for Nursing Home CareNursing home care and 24-hour skilled care at home are the most expensive types of long-term health care. Because nursing homes cost so much – thousands of dollars a month – most people who live in them for more than six months can’t pay the entire bill on their own.

At first, many residents pay with their own money. They “spend down” their resources until they qualify for Medicaid (which must be done according to certain rules).

Veterans’ BenefitsMilitary veterans’ benefits are another source of government funds, and they may help veterans with disabilities and their spouses pay for personal care and homemaker services provided at home.

Disabled or aging veterans with long-term health care needs may be able to get help from the U.S. Department of Veterans Affairs (VA). Its benefits pay for nursing home care in VA facilities and certain services at home.

Older Americans Act ProgramsThe Older Americans Act is a federal program designed to organize, coordinate and provide home- and community-based services to older adults and their families. A broad array of programs helps older people remain in the community as independently as possible.

Services under the Older Americans Act are provided by state and local agencies and other organizations. They include in-home personal care and homemaker services for frail older adults, meals in the community and for homebound elderly, local transportation services, respite care and services for older Native Americans.

You don’t have to have a certain income to use these programs, but they’re targeted at low-income, frail or disabled seniors over age 60; minority older adults; and older adults living in rural areas. For more information, see the Administration on Aging.

Private Financing OptionsMost people don’t have enough money to pay for all long-term care costs on their own, especially ongoing or expensive services like nursing home care. By planning ahead, they can use other private payment options, including:

Long-term care insurance

Reverse mortgages

Certain life insurance policies

Which private financing option is best for a person depends on many factors. These factors include the person’s age, health status, personal finances and risk of needing long-term care.

Long-Term Care InsuranceThis insurance pays for many types of long-term care. The exact coverage depends on the type of policy you buy and what services are covered. You can purchase coverage for nursing home care only, or a comprehensive policy that includes both home care and facility care.

Many companies sell long-term care insurance. It’s a good idea to shop around and compare policies.

Buying this insurance can be a good choice for younger, relatively healthy people at low risk of needing long-term health care. Costs go up for people who are older, have health problems or want more benefits.

Reverse MortgagesA reverse mortgage is a type of home loan that lets a homeowner convert part of the value of his or her home into cash. Unlike a traditional home loan, no repayment is required until the borrower sells the home, no longer uses it as a main residence, or dies.

There are no income or medical requirements for a reverse mortgage. The loan amount is tax-free and can be used for any expense, including long-term care.

If long-term care costs are higher than the amount you borrow, selling your home is not required, but doing so may provide enough funds to repay the loan.

Life SettlementsSome life insurance policies can help pay for long-term care. Policies with an “accelerated death benefit” provide cash advances while you’re still alive. The advance is subtracted from the amount your beneficiaries (the people who get the insurance proceeds) will receive when you die.

You can get an accelerated death benefit if you live permanently in a nursing home, need long-term health care for an extended time, are terminally ill, or have a life-threatening diagnosis such as AIDS. Check your life insurance policy to see exactly what it covers.

You may be able to raise cash by selling your life insurance policy for its current value. This option, known as a “life settlement,” is usually available only to people age 70 and older. The proceeds are taxable and can be used for any reason, including paying for long-term care.

A similar arrangement, called a “viatical settlement,” allows a terminally ill person to sell his or her life insurance policy to an insurance company. This option is typically used by people expected to live two years or less. A viatical settlement provides immediate cash, but it can be hard to get.

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